ADELPHIA ARREST: Rigases arraigned
By John M. Higgins -- Broadcasting & Cable, 7/25/2002 4:00:00 AM
A federal judge set bail at $10 million each for Adelphia Communications Corp. founder John Rigas and his sons, Michael and Timothy, following their arrest on charges that they used the company as a "personal piggy bank."
The Rigases and two other former Adelphia executives were arrested on bank and securities fraud charges Wednesday morning, although they have not yet been indicted.
All face lengthy prison terms and fines.
The Rigases were led away in handcuffs from an Adelphia-owned apartment that is occupied by John Rigas' daughter, Ellen Venetis.
"The investigation has revealed probable cause to believe that John J. Rigas, the defendant, together with members of his family, has looted Adelphia on a massive scale, using the company as the Rigas family's personal piggy bank, at the expense of public investors and creditors," said the complaint filed by the U.S. Attorney's office.
"This case presents a deeply troubling picture of greed and deception at a large, publicly held company," said Stephen Cutler, director of enforcement at the Securities and Exchange Commission.
The Rigases were arraigned at the U.S. District Court for the Southern District of New York in Manhattan.
Vice president of finance James Brown and director of internal reporting Michael Mulcahey were arrested in their homes in Coudersport, Pa., and arraigned in Pennsylvania.
The five executives plus another Rigas son, James, face civil charges filed by the SEC.
The SEC, which closely tracks the U.S. Attorney General's criminal case, is charging the executives with a long list of civil infractions, including hiding liabilities in the books of off-balance-sheet affiliates and falsifying operations statistics, exaggerating subscriber counts and inflating corporate earnings to meet Wall Street's expectations.
The government is also investigating the Rigas family for "concealed rampant self-dealing," including buying luxury condominiums in New York, New Mexico and Colorado; spending nearly $13 million on a golf course on John Rigas' personal property; purchasing timber rights to land in Pennsylvania; paying off hundreds of millions of dollars in personal margin calls; and using Adelphia money to fund undisclosed stock purchases.
Cutler estimated that these expenses alone top $1 billion.
The SEC is also filing civil charges against Coudersport, Pa.-based Adelphia -- a step the SEC rarely takes -- for failing to cooperate with the investigation and allowing the "fraud to continue until the Rigas family lost control over the company's conduct."
Both cases said the Rigas family continued its conduct even after March 27, when Adelphia admitted it had excluded nearly $2.3 billion from its balance sheet.
The executives were arrested at their homes in New York and Pennsylvania to avoid their flight and for other unnamed reasons, officials said.
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